BOK likely to cut rates by 25bps to 1.75%

CPI inflation continues to surprise to the downside of consensus and the BoK's target range, and BoK is under increasing pressure to cut rates.
 
Finance Minister Choi was quoted as saying, "We are deeply worried that the economy is slipping into deflation amid prolonged low consumer price rises."
 
Consensus expects only 15bps of cuts this year, so if we are correct in our expectation of a BoK rate cut this week or in early Q2, KRW has scope to underperform.
 
RBC Capital Markets notes in a report on Tuesday:

• We look for the BoK to cut rates by 25bps to 1.75%, potentially as early as this week (only 2 of 17 polled on Bloomberg expect a rate cut this week, with consensus expecting rates on hold at 2%).
• We have been long USD/KRW in our Portfolio Tracker since 1080.8 (26 Jan). We have a target of 1090 by end-2015.